For each of these situations, indicate the amount to be placed on a statement of financial condition at December 31, 2010.
a. Raj Reel owns the following securities:
1,000 shares of Ree’s
2,000 shares of Bell’s
Ree’s is traded on the New York Stock Exchange. The prices from the most recent trade day follow:
Open 19
High 20½
Low 19
Close 20
Bell’s is a local company whose stock is sold by brokers on a workout basis. (The broker tries to find a buyer.) The most recent selling price was $8.
What is the estimated current value of these securities? (Assume that the commission on Ree’s would be $14 and the commission on Bell’s would be $17.)
b. Charlie has a certificate of deposit with a $10,000 balance. Accrued interest is $500. The penalty for early withdrawal would be $300. What is the estimated current value of the certificate of deposit?
c. Jones has an option to buy 500 shares of ABC Construction at a price of $20 per share. The option expires in one year. ABC Construction shares are presently selling for $25. What is the estimated current value of these options?
d. Carl Jones has a whole-life insurance policy with the face amount of $100,000, cash value of $50,000, and a loan outstanding against the policy of $20,000. Susan Jones is the beneficiary. What is the estimated current value of the insurance policy?
e. Larry Solomon paid $60,000 for a home 10 years ago. The unpaid mortgage on the home is $30,000. Larry estimates the current value of the home to be $90,000. This estimate is partially based on the selling price of homes recently sold in the neighborhood. Larry’s home is assessed for tax purposes at $50,000. Assessments in the area average one-half of market value. The house has not been inspected for assessment during the past two years. Larry would sell through a broker, who would charge 5% of the selling price.
What is the estimated current value of the home?